By Lawrence G. McMillan

We often talk about how the stock market usually trends in the opposite direction from volatility ($VIX). But how do we really measure the trend of $VIX? Often, we use the 20-day moving average, but that is a very short-term moving average that changes trend easily. In a longer-term bull or bear market, we would not want to swing in and out of a “core” position when we are trying to stick with the trend.

Accordingly, I took a look at the 200-day Moving Average of $VIX. Admittedly, the optimum moving average length for determining the trend in $VIX may not be 200 days, but it does show some interesting points. The accompanying chart shows $VIX (pink line), $SPX (green line), and the 200-dayMA of $VIX (dark blue line), going back to 1993 – when $VIX was first listed. Although the definition of $VIX has changed twice since then, this chart shows the value of $VIX at the time in question (anyway, there really isn’t a lot of difference between the results of the various calculations – $VXO, $VIXMO, and $VIX). The $VIX scale is on the left-hand side of the chart, while the $SPX scale is on the right-hand side.

The first thing we need to point out about this chart is that $VIX was rising from…

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